Section 235 — Interpretation. Successor to s.115V, s.115VC, s.115VD, s.115VE of the 1961 Act.
Section 235 is in Chapter XIII — Determination of Tax in Special Cases, which runs from section 190 to section 235.
The section defines fifteen expressions for the whole of the tonnage tax Part, in clauses (a) to (o) with an inserted clause (fa). Several are simple pointers to other statutes — "fishing vessel", "inland vessel", "Director-General of Shipping", "Inland Waterways Authority of India". The two clauses that decide eligibility are (h) and (i). Clause (h) defines a "qualifying company" by four cumulative tests — an Indian company, place of effective management in India, ownership of at least one qualifying ship, and a main object of operating ships — and then defines "place of effective management" as the place where the board or executive directors make their decisions, or, where the board routinely approves decisions made by executives, the place where those executives perform their functions. Clause (i) defines a "qualifying ship" by three tests — fifteen net tonnage or more, registration under the Merchant Shipping Act, 1958 or a licence from the Director-General of Shipping or registration under the Inland Vessels Act, 2021, and a valid net tonnage certificate in force — followed by seven exclusions in items (A) to (G). The remaining clauses define bareboat charter and bareboat charter-cum-demise, factory ship, pleasure craft, seagoing ship, and the four tonnage tax expressions in clauses (k) to (o).
The tonnage tax scheme replaces ordinary computation of profits for shipping companies, and the whole of it turns on whether the company and the ship qualify; the section fixes those tests once for the entire Part. The exclusions in clause (i) keep the concession to genuine shipping and out of vessels that are effectively floating factories, ferries or leisure craft.
| What | Figure | The condition on it | Where |
|---|---|---|---|
| Minimum size for a qualifying ship | 15 net tonnage | A seagoing ship or vessel or inland vessel of fifteen net tonnage or more, with a valid certificate indicating its net tonnage in force | Clause (i)(i) and (i)(iii) |
| Use as a fishing vessel that disqualifies an otherwise qualifying ship | More than 30 days in a tax year | A qualifying ship so used ceases to be one for that year | Clause (i), item (G) |
| Number of qualifying ships a company must own to be a qualifying company | At least one | In addition to being an Indian company with place of effective management in India and a main object of operating ships | Clause (h)(iii) |
Eligibility is decided by two definitions, and both are cumulative — every test in clause (h) and every test in clause (i) must hold, and clause (i) then has to survive the seven exclusions in items (A) to (G). Item (G) is a running test rather than a one-off: a ship used as a fishing vessel for more than thirty days in a tax year drops out for that year even if it otherwise qualifies. Note also that the section defines place of effective management with a second limb for companies whose boards merely rubber-stamp executive decisions, which locates management where the executives actually work.
An Indian company whose main object is operating ships, with its place of effective management in India, owns one seagoing vessel of 40 net tonnage registered under the Merchant Shipping Act, 1958 with a valid net tonnage certificate in force — that is a qualifying company owning a qualifying ship, clause (h)(iii) asking for at least one. Add a second vessel of 12 net tonnage and that one is simply not a qualifying ship, because clause (i)(i) sets the floor at fifteen net tonnage. If the 40-tonne vessel is then used as a fishing vessel for thirty-five days in a tax year, item (G) takes it out of the definition for that year, and a company owning nothing else loses limb (iii) of clause (h) along with it. The same fate meets a vessel whose main use is providing goods or services of a kind normally provided on land, which item (A) excludes however large it is.
Not on its own — you meet section 235 through the tonnage tax option and the assessment that tests it, because whether the company and its ships qualify is decided entirely by clauses (h) and (i). The papers that settle it are the registration under the Merchant Shipping Act, 1958 or the Inland Vessels Act, 2021 (or a Director-General of Shipping licence under section 406 or 407 for a ship registered outside India) and the certificate showing net tonnage.
"qualifying company" means a company, if— (i) it is an Indian company; (ii) the place of effective management of the company is in India; (iii) it owns at least one qualifying ship; and (iv) the main object of the company is to carry on the business of operating ships
See the full 1961 to 2025 concordance.
See the notifications index.